No. 13-684

=======================================

In the Supreme Court of the United States

_______________________

LARRY D. JESINOSKI, ET UX.,

Petitioners

v.

COUNTRYWIDE HOME LOANS, INC., ET AL.,

Respondents.

___________________________________

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

_____________________________

BRIEF AMICI CURIAE OF AARP, NATIONAL CONSUMER

LAW CENTER, AMERICAN CIVIL LIBERTIES UNION,

NATIONAL ASSOCIATION OF CONSUMER ADVOCATES,

AND CENTER FOR RESPONSIBLE LENDING

IN SUPPORT OF PETITIONERS

_____________________________

NINA F. SIMON

1629 K STREET, NW

STE. 300

WASHINGTON, DC 20006

202 827-9770

CAROLYN L. CARTER

STUART ROSSMAN

NATIONAL CONSUMER

LAW CENTER

JEAN CONSTANTINE-DAVIS*

*Counsel of Record

AARP FOUNDATION

LITIGATION

601 E STREET, NW

WASHINGTON, DC 20049

jcdavis@aarp.org

202 434-2060

(Counsel continued on

inside cover)

7 WINTHROP SQUARE

BOSTON, MA 02110

617 542-8010

DENNIS D. PARKER

LAURENCE M. SCHWARTZTOL

RACHEL E. GOODMAN

AMERICAN CIVIL LIBERTIES UNION

125 BROAD ST.

NEW YORK, NY 10004

212 549-2500

ATTORNEYS FOR AMICI CURIAE

======================================

i

TABLE OF CONTENTS

PAGE

TABLE OF APPENDICES ........................................ iv

TABLE OF AUTHORITIES ....................................... v

INTERESTS OF AMICI CURIAE ............................. 1

SUMMARY OF ARGUMENT .................................... 3

ARGUMENT ............................................................... 5

I. TILA’S STATUTORY TEXT AND

STRUCTURE, ALONG WITH

ADMINISTRATIVE AND JUDICIAL

INTERPRETATIONS, MAKE CLEAR

THAT THE RIGHT TO RESCIND IS

EXERCISED THROUGH NOTICE ................ 5

A. TILA’s Plain Language and

Implementing Regulation Allow

Rescission to Be Exercised

Through Simple Notice ........................ 6

B. The 1968 Act Created the

Rescission Right and Directed

Its Exercise Through Simple

Notice ..................................................... 8

ii

C. Contemporaneous Administrative

and Judicial Interpretations of

§ 1635(a) Confirm That

Rescission Is Exercised by

Providing Written Notice .................... 11

D. Congress Retained the Mechanics

of Rescission Intact When It

Amended TILA in 1974 ....................... 15

E. The Enactment of Truth in

Lending Simplification Did Not

Alter the Extant Rescission

Process ................................................. 16

1. The TIL Simplification Act

Did Not Change the

Mechanics of Rescission ........... 16

2. The 1980 Jurisdictional

Amendment to § 1640(a)

Demonstrates that Rescission

Is Enforced, But Not Exercised,

Through the Courts .................. 18

3. Because the Amended

Statute Affords Damages

for Failure to Respond to

Notice of Rescission, Filing

Suit Cannot Be Required

to Exercise Rescission .............. 21

iii

F. The 1995 Amendments

Reinforced that Rescission Is

Exercised Through Notice and

Elevated the Exercise of

Rescission Rights for Homeowners

Facing Foreclosure .............................. 24

II. BROAD ACCESS TO TILA’S

RESCISSION REMEDY PROTECTS

INDIVIDUALS AND COMMUNITIES

FROM THE HARMFUL EFFECTS

OF FORECLOSURE ...................................... 27

CONCLUSION ......................................................... 35

iv

TABLE OF APPENDICES

APPENDIX A TRUTH IN LENDING STATUTE .. 1a

Truth In Lending, Original 1968 Act, Pub. L.

No. 90-321, 15 U.S.C. § 1635, § 1640 ............ 1a

1974 Amendments To The Truth in Lending Act,

Pub. L. No. 93-495, 15 U.S.C. § 1635(f),

§ 1640(a)……..... ............................................ 5a

Truth in Lending Simplification Act, Pub. L.

No. 96-221; 15 U.S.C. § 1635, § 1640(a) ........ 7a

Truth in Lending Act Amendments of 1995,

Pub. L. No. 104-29; 15 U.S.C. § 1649,

§ 1635 ........................................................... 11a

Current Statute, 15 U.S.C. § 1635, § 1640

(2012) ............................................................ 16a

APPENDIX B, REGULATION Z ........................... 27a

Regulation Z, 12 C.F.R. § 226.9; 34 Fed. Reg.

2009-2010 (Feb. 11, 1969) ............................ 27a

Regulation Z, 12 C.F.R. § 226.9(h)(1975);

40 Fed. Reg. 30086 (July 17, 1975) ............. 32a

Regulation Z, 12 C.F.R. § 226.23 (1981); 46 Fed.

Reg. 20848 121-123 (April 7, 1981) ............. 33a

Current Regulation Z, 12 C.F.R. § 1026.23 ............ 38a

v

TABLE OF AUTHORITIES

Cases

Andrews v. Chevy Chase Bank,

535 F. 3d 570 (7th Cir. 2008), cert. den.

557 U.S. 936 (2009) ........................................ 26

Beach v. Ocwen Federal Bank,

523 U.S. 410 (1998). ................................. 14, 20

Belini v. Wash. Mut. Bank, FA,

412 F.3d 17 (1st Cir. 2005) ........... 19-20, 22, 23

Brown v. National Permanent Fed. Sav. &

Loan Ass'n,

683 F.2d 444 (D.C. Cir. 1982) ........................ 14

Burley v. Bastrop,

407 F. Supp. 773 (W. D. La. 1975),

rev’d on other grounds, 590 F.2d 160

(5th Cir. 1979) .......................................... 14, 15

Commodity Futures Trading Comm’n v. Schor,

478 U.S. 833 (1986) ....................................... 17

Gardner & North Roofing & Siding Corp. v.

Board of Governors,

464 F.2d 838 (D.C. Cir. 1972). ....................... 26

Gerasta v. Hibernia Bank,

575 F.2d 580 (5th Cir. 1978) .......................... 22

vi

Littlefield v. Walt Flanagan,

498 F.2d 1133 (10th Cir. 1974) ................ 13, 14

McKenna v. First Horizon Home Loan Corp.,

475 F.3d 418 (1st Cir. 2007). ......................... 26

Milhollin v. Ford Motor Credit,

444 U.S. 555 (1980) ........................................ 12

Palmer v. Wilson,

502 F.2d 860 (9th Cir. 1974) .......................... 14

Sosa v. Fite,

465 F.2d 1227 (5th Cir. 1972) ........................ 18

Sosa v. Fite,

498 F.2d. 114 (5th Cir. 1974) ............. 13, 14, 20

Udall v. Tallman,

380 U.S. 1 (1965) ............................................ 12

Statutes and Regulations

12 U.S.C. § 5581(b)(1), (d) (2010) ............................... 9

15 U.S.C.:

§ 1601 (2012) .................................................. 15

§ 1605(f)(2) ................................................ 25-26

§ 1635 ..................................... 18, 19, 20, 21, 22

§ 1635(a) ................................................. passim

§ 1635(b) ................................. 13, 15, 19, 20, 21

§ 1635(f) .................................................... 15, 21

§ 1635(g) ......................................................... 20

vii

§ 1635(h) ......................................................... 24

§ 1635(i)(1) ..................................................... 26

§ 1635(i)(2) ..................................................... 26

§ 1640 ............................................................. 20

§ 1640(a) ................................. 17, 18, 20, 21, 22

§ 1640(a)(3) ..................................................... 19

§ 1649(a) ......................................................... 25

§ 1649(b)(1-4) ................................................. 25

34 Fed. Reg. 2002 (Feb. 11, 1969) ............................ 11

40 Fed. Reg. 30085 (July 7, 1975) ............................ 16

46 Fed. Reg. 20,892 (April 7, 1981). ......................... 18

75 Fed. Reg. 57,252 (Sept. 20, 2010) .......................... 9

76 Fed. Reg. 79,768 (Dec. 22, 2011) ........................... 9

12 C.F.R.:

§ 1026.23 .................................................... 9, 11

§ 1026.23(a)(2) .................................................. 7

§ 226.23. ............................................... 9, 11, 17

§ 226.9 ...................................................... 11, 16

§ 229.9(a). ....................................................... 11

§ 226.9(b). ....................................................... 11

§ 226.9(d). ................................................. 11, 12

§ 226.9(h) ........................................................ 16

Amendments to the Truth in Lending Act,

Title IV, Pub. L. No. 93-495, § 405,

§ 408, 88 Stat. 1517 (1974) ...................... 15, 22

Dodd-Frank Wall Street Reform and Consumer

Protection Act, Pub. L. No. 111-203,

§§ 1061(b)(1), (d), 124 Stat. 2079 (2010) ......... 9

viii

Truth in Lending Act, Pub. L. No. 90-321,

82 Stat. (1968) . ...................................... passim

Truth in Lending Act Amendments of 1995,

Pub. L. No. 104-29, § 4(a), 109 Stat.

273 (1995) .................................................. 25-26

Truth in Lending Simplification and Reform

Act, Pub. L. No. 96-221, § 612, 94

Stat. 168 (1980) .................................. 16, 18, 22

Legislative History

Truth in Lending Simplification and Reform

Act, Hearing on S. 108 and S. 37,

Before the S. Comm. on Banking,

Housing, and Urban Affairs, 96th

Cong. (1979). ............................................ 10, 17

Truth in Lending Simplification Reform Act,

Report of the Comm. on Banking,

Housing, and Urban Affairs, S. 108,

96th Cong., Sen. Report No. 96-73

(April 9, 1979) .......................................... 19, 20

96th Cong., 125 Cong. Rec. S396 (Jan. 23,

1979) ......................................................... 18, 19

ix

Other Authorities

William C. Apgar and Mark Duda,

Collateral Damage: The Municipal

Impact of Today’s Mortgage Foreclosure

Boom, National Multi-Housing Council

(2005), available at http://www.jec.

senate.gov/ archive/Documents/Reports/

subprime11apr2007revised.pdf. .................... 31

William C. Apgar & Mark Duda, The

Municipal Cost of Foreclosures: A

Chicago Case Study, Homeownership

Preservation Foundation 24 (Feb.

2005), available at http://www.nw.

org/network/neighborworksProgs/

foreclosuresolutionsOLD/documents/

2005Apgar-DudaStudy-FullVersion.pdf ....... 33

Michael Bess, Assessing the Impact of Home

Foreclosures in Charlotte

Neighborhoods, 1 Geography & Public

Safety 1 (2008), available at http://www.

urban.org/UploadedPDF/411909_impact

_of_ forclosures.pdf. ....................................... 32

Debbie Gruenstein Bocian, Wei Li & Keith S.

Ernst, Foreclosures by Race and

Ethnicity: The Demographics of a Crisis,

Center for Responsible Lending (2010),

available at http://www.responsible

lending.org/mortgage-lending/research-

analysis/foreclosures-by-race-and-

ethnicity.pdf. ............................................ 30, 34

x

William E. Boyd, Federal Consumer Credit

Protection Act—A Consumer’s Perspective,

45 Notre Dame L. Rev. 171 (1970). ......... 10, 13

Center for Responsible Lending, 2013 Update:

The Spillover Effects of Foreclosures

(2013), available at http://www.responsible

lending.org/mortgage-lending/research-

analysis/2013-crl-research-update-

foreclosure-spillover-effects-final-aug-19-

docx.pdf .................................................... 29, 30

Center for Responsible Lending, Subprime

Spillover: Foreclosures Cost North

Carolina Neighbors $861 Million

(2008), available at http://www.

responsiblelending.org/north-carolina/

nc-mortgage/tools-resources/facts-tips/

nc-subprime-spillover-august-08-

update.pdf ...................................................... 31

CoreLogic, Inc., CoreLogic Reports 47,000

Completed Foreclosures in May (July 8,

2014), available at http://www.corelogic.

com/about-us/news/corelogic-reports-

47,000-completed-foreclosures-in-may.

aspx ................................................................ 28

xi

Peter Dreier, Saqib Bhatti, Rob Call, Alex

Schwartz & Gregory Squires,

Underwater America: How the So-

Called Housing “Recovery” Is Bypassing

Many American Communities, Haas

Institute 5 (2014), available at http://

diversity.berkeley.edu/sites/default/

files/HaasInsitute_Underwater

America_PUBLISH_0.pdf. ..................... 29, 30

Ingrid Gould Ellen, Josiah Madar & Mary

Weselcouch, The Foreclosure Crisis

and Community Development:

Exploring REO Dynamics in Hard-Hit

Neighborhoods, Furman Center for

Real Estate & Urban Policy 2 (2013),

available at http://furmancenter.org/

files/publications/REOHardHitWorking

PaperApril2013.pdf ........................................ 32

Furman Center for Real Estate & Public

Policy, Do Foreclosures Cause Crime?

(Feb. 2013), available at http://

furmancenter.org/files/publications/

DoForeclosuresCauseCrime.pdf .................... 33

John P. Harding, Eric Rosenblatt & Vincent

W. Yao, The Contagion Effect of

Foreclosed Properties, 66 J. Urb. Econ.

164 (2009) ....................................................... 30

xii

Robert C. Hockett, It Takes a Village:

Municipal Condemnation Proceedings

and Public/Private Partnerships for

Mortgage Loan Modification, Value

Preservation, and Local Economic

Recovery, 18 Stan. J.L. Bus. & Fin.

121 (2012). ...................................................... 34

Dan Immergluck & Geoff Smith, The External

Costs of Foreclosure: The Impact of

Single-family Mortgage Foreclosures

on Property Values, 17 Housing Policy

Debate 57 (2006) ............................................ 30

Joint Econ. Comm. of the U.S. Senate,

Sheltering Neighborhoods from the

Subprime Foreclosure Storm 15 (2007) ......... 31

G. Thomas Kingsley, Robin Smith & David

Price, The Impacts of Foreclosures on

Families and Communities, The Urban

Institute 17-18 (2009), available at

http://www.urban.org/UploadedPDF/

411909_impact_of_ forclosures.pdf ......... 32, 33

Kintner, Henneberger & Neill, A Primer on

Truth in Lending, 13 St. Louis U.L.J.

501 (1969). .................................................. 5, 10

xiii

Kai-yan Lee, Foreclosure’s Price-Depressing

Spillover Effects on Local Properties: A

Literature Review, Federal Reserve

Bank of Boston 1 (2008), available at

https://www.bostonfed.org/commdev/

pcadp/2008/pcadp 0801.pdf ........................... 29

Signe-Mary McKernan, Caroline Ratcliffe,

Eugene Steuerle & Sisi Zhang, Less

Than Equal: Racial Disparities in

Wealth Accumulation, The Urban

Institute 3 (2013) ........................................... 29

National Fair Housing Alliance, The Banks

Are Back – Our Neighborhoods Are

Not: Discrimination in the Maintenance

and Marketing of REO Properties 2

(Nov. 2011), available at http://www.

nationalfairhousing.org/Portals/33/

the_banks_ are_back_web.pdf. ................ 32, 33

Lea Krivinskas Shepard, It’s All About the

Principal: Preserving Consumers’ Right

of Rescission Under the Truth in

Lending Act, 89 N.C. L. Rev. 171 (2010). ...... 26

Stephen Whitaker & Thomas J. Fitzpatrick,

The Impact of Vacant, Tax-Delinquent,

and Foreclosed Property on Sales Price

of Neighboring Homes, 11-23R Federal

Reserve Bank of Cleveland 1 (March

2012), available at http://www.cleveland

fed.org/research/workpaper/2011/

wp1123r.pdf ............................................. 30, 31

xiv

U.S. Census Bureau News, Residential

Vacancies and Homeownership in the

First Quarter 2014, CB14-61 U.S.

Department of Commerce 5 (2014),

available at http://www.census.gov/

housing/hvs/files/currenthvspress.pdf .... 27, 28

1

INTERESTS OF AMICI CURIAE1

AARP is a nonprofit, nonpartisan organization

with a membership that helps people turn their goals

and dreams into real possibilities, seeks to

strengthen communities, and fights for the issues

that matter most to families such as healthcare,

employment and income security, retirement

planning, affordable utilities and protection from

financial abuse. AARP supports the disclosure

requirements and substantive protections of the

Truth in Lending Act. AARP has advocated for

decades that the right to rescind a mortgage is

pivotal to TILA’s self-enforcing statutory scheme.

The National Consumer Law Center (“NCLC”)

is a national research and advocacy organization

focusing on the legal needs of consumers, especially

low income and elderly consumers. For over 40 years

the NCLC has been the consumer law resource

center to which legal services and private lawyers,

state and federal consumer protection officials, public

policy makers, consumer and business reporters, and

consumer and low-income community organizations

across the nation have turned for legal answers,

policy analysis, and technical and legal support.

1 The parties’ letters of consent to the filing of this brief have

been filed with the Clerk. Under Rule 37.6 of the Rules of this

Court, amici state no counsel for a party authored this brief in

whole or in part, and no counsel or party made a monetary

contribution intended to fund the preparation or submission of

this brief. No person other than amici curiae or their counsel

made a monetary contribution to its preparation or submission.

2

NCLC is recognized nationally as a

preeminent expert in consumer credit legal analysis.

It is author of the widely praised eighteen-volume

Consumer Credit and Sales Legal Practice Series,

including Truth in Lending.

The American Civil Liberties Union (“ACLU”)

is a nationwide, nonprofit, nonpartisan organization

with more than 500,000 members dedicated to the

principles of liberty and equality embodied in the

Constitution and this nation’s civil rights laws. Since

it was founded in 1920, the ACLU has appeared

before this Court in numerous cases, both as direct

counsel and amicus curiae. The ACLU’s Racial

Justice Program engages in litigation and advocacy

to enforce and protect the constitutional and civil

rights of people who have been historically denied

their rights on the basis of race, including in the area

of fair lending and the racially disparate impact of

the foreclosure crisis.

The National Association of Consumer

Advocates (“NACA”) is a nonprofit corporation whose

members are private and public sector attorneys,

legal services attorneys, law professors and law

students whose primary focus involves the protection

and representation of consumers. NACA’s mission is

to promote justice for all consumers by maintaining a

forum for information sharing among consumer

advocates across the country and serving as a voice

for its members as well as consumers in the ongoing

effort to curb unfair and abusive business practices.

Enforcement and compliance with consumer

3

protection laws has been a continuing concern of

NACA since its inception.

The Center for Responsible Lending (“CRL”) is

a nonprofit, nonpartisan organization that works to

protect homeownership and family wealth by fighting

predatory lending practices. Its focus is on consumer

lending: primarily mortgages, payday loans, credit

cards, bank overdrafts, auto loans, and student

loans.

CRL’s work grows directly from its affiliation

with Self-Help, one of the nation’s largest nonprofit

community development lenders. For over 30 years,

Self-Help has worked to create ownership and

economic opportunity in underserved communities

through responsible loans and financial

services. Self-Help has provided $6 billion in

financing to 75,000 homebuyers, small businesses

and nonprofit organizations, and serves more than

80,000 mostly low-income families through 30 retail

credit union branches in North Carolina, California,

and Chicago.

SUMMARY OF ARGUMENT

When Congress enacted the Truth in Lending

Act (“TILA”), it required one simple act to exercise

rescission: notice to the creditor. Over more than

four decades, as it actively reshaped and revamped

many of TILA’s other requirements, Congress never

changed or added to this simple requirement. By

retaining TILA’s straightforward rescission process,

exercisable by a homeowner, Congress endorsed the

4

Federal Reserve Board’s contemporaneous and

longstanding interpretation that the right is

exercised solely through notice.

Advancing a recently-formulated view that

rescission must be exercised by filing a lawsuit,

Respondents ask the Court to rewrite the plain

language of the Act, which contains no such

requirement. Respondents’ interpretation would

render meaningless Congress’s express creation of

civil liability for failure to respond to rescission by

notice.

In adopting TILA, Congress sought to protect

consumers from some of the most abusive practices in

the credit marketplace. In the wake of the financial

crisis that has taken such a toll on homeownership

and blighted so many communities, that goal

remains front and center today. Imposing an

additional burden on consumers who are entitled to

exercise rescission would likely lead to additional

home foreclosures and the manifold collateral harms

that widespread foreclosures create for communities.

5

ARGUMENT

I. TILA’S STATUTORY TEXT AND

STRUCTURE, ALONG WITH

ADMINISTRATIVE AND JUDICIAL

INTERPRETATIONS, MAKE CLEAR

THAT THE RIGHT TO RESCIND

IS EXERCISED THROUGH NOTICE.

Congress created the statutory right to rescind

when it enacted the Truth in Lending Act in 1968.

Pub. L. No. 90-321, § 125(a), 82 Stat. (1968)

(currently codified at 15 U.S.C. § 1635(a) (2012));

Appendix A, 1a. Rescission protects homeowners by

giving them three days outside of the pressure cooker

atmosphere of a loan closing to review the costs and

benefits of the transaction before risking their most

valuable asset—the home. It does this by affording

them the right to cancel the transaction during that

three day window. Congress created the right of

rescission to redress “the numerous abuses of credit

which result in rendering families homeless—often

after the entire or a substantial portion of a first

mortgage is paid.” Kintner, Henneberger & Neill, A

Primer on Truth in Lending, 13 St. Louis U.L.J. 501,

523 (1969). Other abusive credit practices emerged

in the years prior to the current financial crisis; the

resulting foreclosures have devastated individuals

and communities. Where consumers are not

provided the information Congress deemed

necessary, they are deprived of the opportunity

Congress intended—to use the three day period to

make an informed decision and avoid abusive loans.

6

A. TILA’s Plain Language and

Implementing Regulation Allow

Rescission to Be Exercised

Through Simple Notice.

The plain language of the current statute and

regulation allow the consumer to exercise the right of

rescission simply by giving notice to the creditor.

The statute provides:

Except as otherwise provided in this

section, in the case of any consumer

credit transaction in which a security

interest . . . is or will be retained or

acquired in any property which is used

as the principal dwelling of the person

to whom credit is extended, the obligor

shall have the right to rescind the

transaction until midnight of the third

business day following the

consummation of the transaction or the

delivery of the information and

rescission forms required under this

section together with a statement

containing the material disclosures

required under this subchapter,

whichever is later, by notifying the

creditor, in accordance with regulations

of the Bureau, of his intention to do so.

The creditor shall also provide, in

accordance with regulations of the

Bureau, appropriate forms for the

obligor to exercise his right to rescind

any transaction subject to this section.

7

(Emphasis added). 15 U.S.C. § 1635(a) (2012);

Appendix A, 16a. The plain, unequivocal,

unmistakeable meaning of this language is that a

consumer who decides to exercise the right to rescind

does so by notifying the creditor.

The governing regulation is equally

unequivocal:

To exercise the right to rescind, the

consumer shall notify the creditor of the

rescission by mail, telegram or other

means of written communication. Notice

is considered given when mailed, when

filed for telegraphic transmission or, if

sent by other means, when delivered to

the creditor's designated place of

business.

(Emphasis added). 12 C.F.R. § 1026.23(a)(2)

(2012); Appendix B, 38a.

As discussed in detail in the next subsections,

this core language has continuously remained in

place from the original enactment of the statute in

1968, through several amendments and

accompanying generations of administrative

interpretation.

8

B. The 1968 Act Created the

Rescission Right and Directed

Its Exercise Through Simple

Notice.

When Congress enacted TILA in 1968 it

provided a consumer with a simple and

straightforward means to exercise the right to

rescind, whether within the first three days or later if

disclosures were not provided: “by notifying the

creditor . . . of his intention to do so.” Truth in

Lending Act, Pub. L. No. 90-321, § 125(a), 82 Stat.

(1968); Appendix A, 1a. Through the many

amendments to and restructurings of TILA over more

than four decades, the core text of § 1635(a), creating

the right to rescind and the means of exercising it,

has continued in the statute virtually unchanged.

As first enacted in 1968, TILA § 1635(a) read:

(a) Except as otherwise provided in this

section, in the case of any consumer

credit transaction in which a security

interest is retained or acquired in any

real property which is used or is

expected to be used as the residence of

the person to whom credit is extended,

the obligor shall have the right to

rescind the transaction until midnight of

the third business day following the

consummation of the transaction or the

delivery of the disclosures required

under this section and all other material

disclosures required under this chapter,

9

whichever is later, by notifying the

creditor, in accordance with regulations

of the Board, of his intention to do so.

The creditor shall clearly and

conspicuously disclose, in accordance

with regulations of the Board, to any

obligor in a transaction subject to this

section the rights of the obligor under

this section. The creditor shall also

provide, in accordance with regulations

of the Board, an adequate opportunity to

the obligor to exercise his right to

rescind any transaction subject to this

section.

1968 Act, 15 U.S.C. § 1635(a) (emphasis added). The

italicized language, which is at the core of this case,

is unchanged since 1968 except for the 2010

replacement of “Board” with “Bureau.”2 As a

commenter noted shortly after the statute’s

enactment, “the consumer could rescind the contract

by simply giving the creditor notice of his intent to

2 The Federal Reserve Board (“Board”) administered TILA for

over 40 years until the Dodd-Frank Wall Street Reform and

Consumer Protection Act transferred its authority to the

Consumer Financial Protection Bureau (“Bureau”) on July 21,

2011. See Pub. L. No. 111-203, §§ 1061(b)(1), (d), 124 Stat. 2079

(2010) (codified at 12 U.S.C. §§ 5581(b)(1), (d)); Designated

Transfer Date, 75 Fed. Reg. 57,252, 57,252 (Sept. 20, 2010). The

Bureau adopted the Board’s Regulation Z implementing the

rescission process without change but redesignated it from 12

C.F.R. § 226.23 to 12 C.F.R. § 1026.23 (76 Fed. Reg. 79,768 (Dec.

22, 2011)).

10

rescind.” Note, Truth in Lending: Judicial

Modification of the Right of Rescission, 1974 Duke

L.J. 1227, 1232. And as originally enacted, if

disclosures were not provided at consummation, the

right to rescind continued indefinitely or until three

days after the creditor provided the necessary

information and notice of the right to cancel. See,

e.g., William E. Boyd, Federal Consumer Credit

Protection Act—A Consumer’s Perspective, 45 Notre

Dame L. Rev. 171, 190 (1970). (“The effect is that for

every day the creditor delays giving the rescission

notice or making the other disclosures, the consumer

is given another day within which to rescind the

contract”).

Congress took pains to emphasize the Federal

Reserve Board’s (“the Board”) broad rulemaking

authority to implement § 1635(a), three times calling

upon the Board to fill out the details of the rescission

process “in accordance with regulations of the

Board.” TILA’s explicit focus on the Board’s role in

implementing rescission is grounded in the critical

importance of the rescission right. Kintner,

Henneberger & Neill, supra, at 527 (“Notice of the

right of rescission is the most important disclosure”);

Truth in Lending Simplification and Reform Act,

Hearing on S. 108 and S. 37, Before the S. Comm. on

Banking, Housing, and Urban Affairs, 96th Cong.

(1979) (Remarks of Sen. Proxmire describing the

right of rescission as “one of the most important

protections in the act.”).

11

C. Contemporaneous Administrative

and Judicial Interpretations of

§ 1635(a) Confirm That Rescission is

Exercised by Providing Written

Notice.

In 1969 the Board adopted Regulation Z, 12

C.F.R. Part 226, to flesh out the rescission process.

Truth in Lending, 34 Fed. Reg. 2002, 2009-10 (Feb.

11, 1969); Regulation Z, 12 C.F.R. § 226.9; Appendix

B, 27a – 31a.3 It directed that the right extends for

three business days following either consummation

or “the date of delivery of the disclosures [of

rescission rights] and all other material disclosures,”

whichever occurs later. Id. at 2010; Reg. Z,

§ 226.9(a); Appendix B, 27a. More importantly, it

provided that rescission is exercised by providing

written notice to the creditor by “mail, telegram or

other writing,” and specified no other requirements.

Id.

As adopted in 1969, Regulation Z directed the

creditor to furnish “two copies” of the notice to each

consumer, and provided that “one . . . may be used . . . to cancel the transaction.” Id., Reg. Z, § 226.9(b),

Appendix B, 28a. The notice itself instructed the

borrower when to cancel –“within three business

days from the [] date [of the transaction] or any later

date on which all material disclosures required under

3 Through several renumberings from § 226.9 to § 226.23 to

most recently § 1026.23, the rescission provision of Regulation Z

has retained the same essential text and requirements. See

Appendix B, 27a-44a.

12

the Truth in Lending Act have been given to you.”

Id.; Appendix B, 28a – 29a. It also stated plainly

that the borrower may cancel ”by notifying [name of

creditor] at [address of creditor’s place of business] by

mail or telegram.” Id. The regulation provided that

the consumer’s notice may simply say, “I hereby

cancel this transaction,” with a signature and a date.

Id. Further confirming that the consumer’s notice

triggers the creditor’s rescission obligations, the

regulation provided: “Within 10 days after receipt of

a notice of rescission, the creditor shall” take

designated steps to acknowledge and implement the

rescission. Id.; Reg. Z, § 226.9(d); Appendix B, 30a.

The Board imposed no requirement that the

consumer sue to exercise this right. See Appendix B,

27a – 31a.

As this Court has made clear, because it is “a

contemporaneous construction of [the statute] by the

men charged with the responsibility of setting its

machinery in motion, of making the parts work

efficiently and smoothly while they are yet untried

and new,” the Board’s decision not to impose an

extra-statutory requirement that a lawsuit be filed to

exercise rescission is entitled to “great deference.”

Udall v. Tallman, 380 U.S. 1, 16 (1965) (internal

citations and quotations omitted); see also Milhollin

v. Ford Motor Credit, 444 U.S. 555, 566 (1980)

(“[T]raditional acquiescence in administrative

expertise is particularly apt under TILA, because the

Federal Reserve Board has played a pivotal role in

‘setting [the statutory] machinery in motion.’”).

Deferring to the administrative interpretation of

TILA is particularly logical at this juncture:

13

Regulation Z, like the statute it implements, has

retained the same essential text and requirements

for more than four decades directing exercise of the

rescission right through simple notice whether

within three days after consummation or three days

after receipt of disclosures.4

After the promulgation of Regulation Z, federal

courts of appeal interpreted the mechanics of

rescission in accord with the Board, holding that

even when exercised beyond the initial three day

period, rescission is still exercised through notice

alone. As the Fifth Circuit explained: two years after

entering into a contract with a “home improvement

contractor of dubious repute . . . Sosa invoked her

statutory right of rescission . . . by directing letters to

this effect to [her creditors]." Sosa v. Fite, 498 F. 2d.

114, 116, 117 (5th Cir. 1974) (“Sosa II”) (emphasis

added). Similarly, in Littlefield v. Walt Flanagan,

“Purchasers learned of their statutory right to

rescind on February 20, 1972 [15 months after

consummation], and on the next day notified the

creditor that they chose to exercise the right.

Defendants ignored the notice.” 498 F.2d 1133, 1134

(10th Cir. 1974); id. (“Regulation Z . . . details rules

relating to notification by the seller to the purchaser

of his right to rescind. Defendants ignored these

4 William E. Boyd, supra, at 191-92. (“Satisfaction of the basic

requirements of the Act, as well as the giving of notice of the

right to rescind, is a condition for the running of the three-day

‘cooling-off’ period. A creditor who fails to make these

disclosures extends the period during which the consumer may

rescind. . . .”)

14

rules.”); see also Brown v. National Permanent Fed.

Sav. & Loan Ass'n, 683 F.2d 444, 447 (D.C. Cir.

1982) (“By letter dated July 18, 1980, appellee Brown

exercised her statutory right to rescind”); Palmer v.

Wilson, 502 F.2d 860, 861 (9th Cir. 1974) (“an obligor

exercises his right of rescission solely by notifying the

creditor within prescribed time limits of his intention

to rescind.”).

In each of these cases, consumers filed suit to

enlist the aid of the courts to enforce rescission, not to

exercise it. “Sosa has been forced to resort to federal

court only because the creditors refused to recognize

and abide by the plain operation of the rescission

remedy, which should have been afforded self-

operating effect without the need for judicial

involvement.” Sosa II, 498 F. 2d. at 122. That notice

was sufficient to exercise rescission was a given.

This notion undergirds the courts’ analyses of the

violation of § 1635(b), which occurs when creditors

“ignored the notice,” and the question of whether

TILA provided additional redress for this second

violation. Littlefield, 498 F.2d at 1134; Sosa II, 498 F.

2d at 118-19 (“[T]he statute contemplates an orderly

progression of specific events . . . . Specifically,

section 1635(b) envisions responsive action on the

creditor's part to a rescission notice, after which the

debtor then becomes obligated to tender either the

property or a sum reflecting its reasonable value.”);

Burley v. Bastrop, 407 F. Supp. 773, 777 (W. D. La.

1975) (finding “defendant's obligation was clear when

it received plaintiff's notice of rescission. But . . . the

Loan Company ‘failed to carry out any of [its]

15

statutory duties’”) (internal citation omitted), rev’d on

other grounds, 590 F.2d 160 (5th Cir. 1979).

D. Congress Retained the Mechanics

of Rescission Intact When It

Amended TILA in 1974.

In 1974, Congress added § 1635(f), to provide

that the homeowner’s right of rescission terminates

three years after consummation or upon sale of the

home, whichever is earlier. Amendments to the

Truth in Lending Act, Title IV, Pub. L. No. 93-495,

§ 405, 88 Stat. 1517-1518 (1974) (current version at

15 U.S.C. § 1635(f) (2012)) (“1974 Amendments”)

(Appendix A, 5a); see Beach v. Ocwen Federal Bank,

523 U.S. 410, 419 (1998). While reaffirming that

TILA “vests a continuing power of rescission in the

credit purchaser until three days following delivery of

statutorily prescribed disclosures,” Congress

provided that the period for exercising the right

would end three years after origination. Sosa II, 498

F.2d at 117-18.

In retaining the core text of § 1635(a),

Congress endorsed the extant regulatory and judicial

interpretations of rescission, and confirmed that the

statutory right of rescission is exercised solely

through written notice to the creditor. Burley, 407 F.

Supp. at 779 (“[W]hen it amended the Truth-in-

Lending Act . . . [Congress] did not choose

legislatively to overrule or limit the two Sosa

decisions regarding rescission.”). Subsequently, the

Board amended Regulation Z to “limit[] to a three-

year period those unexpired rights which previously

16

continued indefinitely,” but it did not otherwise alter

12 C.F.R. § 226.9, governing rescission. 40 Fed. Reg.

30085, 30086 (July 7, 1975) (adding § 226.9(h), “Time

limit for unexpired right of rescission.”); see Appendix

B, 32a.

E. The Enactment of Truth in Lending

Simplification Did Not Alter the

Extant Rescission Process.

In 1980 Congress substantially overhauled

TILA by enacting the Truth in Lending

Simplification and Reform Act, Pub. L. No. 96-221,

§ 612, 94 Stat. 168 (1980) (current version at 15

U.S.C. § 1601 (2012)) (“TIL Simplification”);

Appendix A, 7a – 10a. This Act narrowed the type of

transactions subject to the right to rescind and the

categories of disclosure that would trigger the right,

but left untouched the core statutory provisions

directing the mechanics of the rescission process. In

addition, Congress made other changes that

underscore that the right of rescission is exercised by

giving notice.

1. The TIL Simplification Act

Did Not Change the

Mechanics of Rescission.

In enacting TIL Simplification, Congress made

no change to the plain language of § 1635(a) that

directs the homeowner to exercise the right through

notice, or to the creditor’s obligation in § 1635(b) to

17

respond to that notice.5 Since Congress focused on

rescission in enacting TIL Simplification, and was

well aware of the Board’s interpretation of the

mechanics of rescission, it is deemed to have

acquiesced in that interpretation. See Commodity

Futures Trading Comm’n v. Schor, 478 U.S. 833, 846

(1986) (“[W]hen Congress revisits a statute giving

rise to a longstanding administrative interpretation

without pertinent change, the congressional failure

to revise or repeal the agency’s interpretation is

persuasive evidence that the interpretation is the

one intended by Congress.” (internal quotation

marks omitted)). Following TIL Simplification, the

Board substantially expanded Regulation Z and

renumbered its rescission provision as 12 C.F.R.

§ 226.23. It made a slight amendment to the

regulation to clarify the events from which the three

5 The only change was to allow creditors 20 days instead of 10

to respond to the notice. TIL Simplification, 15 U.S.C. § 1635(b);

Appendix A, 8a. In testimony about this extended response

time, the American Bankers Association revealed their

understanding that rescission is exercised by providing notice:

We also support the extension of the time period

within which a creditor has to return any money

or property to the obligor after the obligor has

exercised the right to rescind. This gives the

creditors a better opportunity to determine

whether or not the right to rescind is valid and

has been appropriately exercised. . . .

Truth in Lending Simplification Reform Act, Hearing on S. 108

and S. 37, Before the S. Comm. on Banking, Housing and Urban

Affairs, 96th Cong. (1979) (Statement of David Smith, Jr., of

Amer. Banker’s Assn.). (emphasis added).

18

day rescission period runs, but retained the

mechanics of the rescission process unchanged. 46

Fed. Reg. 20,892, at 122-123 (April 7, 1981);

Appendix B, 33a – 37a. This core text remains

unchanged today.

2. The 1980 Jurisdictional

Amendment to § 1640(a)

Demonstrates that

Rescission Is Enforced,

But Not Exercised,

Through the Courts.

The 1980 Amendments also make plain that a

lawsuit may be used to enforce rescission but is not

necessary to exercise the right. Prior to the 1980

Amendments, courts were unclear about whether

TILA provided a jurisdictional basis for an action to

enforce rescission. See Sosa v. Fite, 465 F.2d 1227,

1228-29 (5th Cir. 1972) (“Sosa I”) (finding jurisdiction

under other sources of federal law, and stating that,

“whether the Act itself affords the federal court the

authority to grant rescission” is “[a] more difficult

issue, and one we need not reach”).

Congress settled the matter in 1980 by

amending § 1640, which had governed jurisdiction

over TILA actions since TILA’s enactment, to clarify

the jurisdictional basis for an action to enforce

rescission. The amended provision states: “any

creditor who fails to comply with any requirement . . .

including any requirement under section 125 [that is,

15 U.S.C. § 1635] . . . is liable.” TIL Simplification, 15

U.S.C. § 1640(a) (emphasis added); Appendix A, 10a.

19

It also added that, “in the case of any successful

action to enforce the foregoing liability or in any

action in which a person is determined to have a right

of rescission, [the creditor is liable for] the costs of the

action, together with a reasonable attorney’s fee as

determined by the court.” Id., § 1640(a)(3); Appendix

A, 9a. (emphasis added). With these amendments,

Congress made “explicit that a consumer may

institute suit under section 130 to enforce the right of

rescission and recover costs and attorney’s fees in a

successful action.” (emphasis in original). Truth in

Lending Simplification Reform Act, Report of the

Comm. on Banking Housing, and Urban Affairs, S.

108, 96th Cong., Sen. Report No. 96-73 at 18 (April 9,

1979) (Section by Section analysis) (“Sen. Rep. No.

96-73”); 96th Cong., 125 Cong. Rec. S396 (Jan. 23,

1979) (Remarks by Sen. Proxmire) (same).

Embedded in this grant of authority to enforce

rescission is the understanding that filing suit is not

an element of exercising rescission. The language is

permissive (“a consumer may institute suit”), and

does not indicate that a consumer must file suit in

order to exercise rescission.

Moreover, by authorizing such a suit under the

civil liability provision, 15 U.S.C. § 1640(a), rather

than under the provision governing the exercise of

rescission, § 1635, Congress indicated that any civil

suit concerning rescission was not directly related to

the exercise of rescission. Because “section 1635 is

written with the goal of making the rescission

process a private one, worked out between creditor

and debtor without the intervention of the courts,”

Belini v. Wash. Mut. Bank, FA, 412 F.3d 17, 25 (1st

20

Cir. 2005), it “does not even contemplate the

necessity of judicial intervention to effect rescission.

On the contrary, the section creates legal remedies

which have binding legal effect absent any court

action.” Sosa II, 498 F.2d. at 121.

Respondents assert to the contrary – that a

consumer must sue to exercise the right to rescind.

Resp. to Pet’rs. Br. at 26, Jesinoski v. Countrywide

Home Loans, Inc., 729 F.3d 1092 (8th Cir. 2013), (No.

13-684), 2014 U.S. S. Ct. Briefs LEXIS 1078, at *46.

But implicit in their assertion is that § 1635 provides

jurisdiction over rescission actions, an argument

belied by the statute’s text and structure. Section

1635 makes no reference to the jurisdiction of courts,

and no reference to lawsuits except for two provisions

about rights and remedies if a lawsuit is filed.6 See

Appendix A, 7a – 9a; Beach, 523 U.S. at 416 (“The

subsection says nothing in terms of bringing an

action”). Congress instead located jurisdiction over

rescission actions in § 1640, making clear that such

actions are not necessary to effectuate the right to

rescission located in § 1635.

6 Section 1635(b) confirms that courts can continue to exercise

their inherent equitable powers to modify the rescission process;

it does not provide an independent source of authority for

consumers to sue to enforce rescission. Section 1635(g), which

was added to “explicitly provide[] that a consumer who exercises

his right to rescind may also bring suit under the act for other

violations not relating to rescission,” is not a jurisdictional basis

for a rescission action. Sen. Rep. No. 96-73 at 15 (April 9, 1979)

(Section by Section analysis). Congress “codifie[d] the majority

position of the courts” that consumers need not elect rescission

or damages. Id.

21

By taking this route, Congress was clear that,

while the time limits in § 1635(f) cut off exercise of

the right, the statute of limitations for the filing of a

consumer’s action to enforce the right appears in

§ 1640. Section 1640(e) requires suit “within one

year from the date of the occurrence of the violation.”

The “occurrence of the violation” that triggers the

running of the statute of limitations for a rescission

lawsuit is the creditor’s violation of § 1635(b)

(requiring creditor to take specific steps to effectuate

rescission). If the creditor responds to the notice by

returning money or property and taking steps to void

its security interest, followed by the consumer

tendering back, the statute’s self-effectuating

rescission process requires no involvement by a court.

A consumer’s lawsuit to enforce rescission is made

necessary only by the creditor who fails to respond

within 20 days after receipt of the consumer’s notice

by taking steps to unwind the transaction, violating

§ 1635(b). By amending § 1640(a) to authorize

rescission actions, Congress mandated that those

actions be filed within one year and twenty days after

the creditor receives the rescission notice.

3. Because the Amended

Statute Affords Damages

For Failure to Respond

to Notice of Rescission,

Filing Suit Cannot Be

Required to Exercise

Rescission.

Initially, TILA’s statutory penalties were

available only for disclosure violations, including

22

failure to disclose the right to rescind, but not for the

creditor’s violation of § 1635(b) (failing to properly

respond to rescission). 1968 Act, 15 U.S.C. § 1640(a);

Appendix A, 3a (“any creditor who fails . . . to disclose

. . . is liable”); see Gerasta v. Hibernia Bank, 575 F.2d

580, 583 (5th Cir. 1978). Congress amended

§ 1640(a) in 1974 to make creditors liable for failures

to “comply with any requirement” of specified

chapters of TILA. 1974 Amendments, § 408, 15

U.S.C. § 1640(a); Appendix A, 5a – 6a. Those

chapters include the rescission provisions, and at

least one court concluded that, because of the 1974

amendment, § 1640(a) remedies apply when a

creditor fails to comply with § 1635. Gerasta, 575

F.2d at 583.

In 1980 Congress made the existence of this

remedy explicit by extending § 1640(a) to a violation

of “any requirement under section 125 [§ 1635].” TIL

Simplification, 15 U.S.C. §1640(a); Appendix A, 10a.

This new “language of the Act allows a statutory

penalty to be assessed for a creditor's failure to take

adequate steps to respond, within twenty days, to a

debtor's rightful notice of rescission,” and measures

the statute of limitations from the date the creditor

fails to perform in response to a borrower’s notice of

rescission.7 Belini, 412 F.3d at 24 n.2.

7 “The ‘date of the occurrence of the violation’ cannot be the

date the loan was closed; the closing is not the source of the

debtor's complaint, and such a rule would create nonsensical

results.” Belini, 412 F.3d at 26.

23

Respondents’ position before the Court fails to

take account of this violation: if rescission can be

exercised only upon notice and suit, the creditor

would have no obligation to respond until the

consumer files suit. At that point the court is in

control of the process and the parties’ obligations.

Under the Respondents’ analysis, there can never be

a violation of § 1635(b) for failure to respond to the

rescission notice, because the creditor has no

obligation to respond even if it recognizes the validity

of the consumer’s claim.

But a consumer’s valid notice of rescission

alone triggers the creditor’s obligation. A creditor

who does not take the prescribed steps “has generally

violated a ‘requirement’ of section 1635 and can be

held liable for damages under section 1640.” Id. at 25.

(emphasis in original). A consumer exercises the

right unilaterally but when a consumer sues, a court

decides whether the rescission is meritorious and

whether the court will enforce it. See id. If the court

determines that the rescission is not based on a

meritorious claim, a creditor will have no liability for

the rescission itself, and no corresponding liability for

failing to respond. If the rescission is found

meritorious, a creditor can “be held liable for

wrongfully refusing to rescind when asked to do so by

a debtor.” Id. at 25 n.3.

As previously explained, disclosure violations

under § 1635(a) were already covered by the Act

when Congress adopted the amendment to § 1640(a)

in 1980 expanding liability for damages to “any

violation” of § 1635. There is no violation of § 1635

24

that could give effect to the 1980 amendments other

than a violation of § 1635(b). This amendment would

be stripped of all meaning if there is no violation

when a creditor fails to honor rescission.

F. The 1995 Amendments Reinforced

that Rescission Is Exercised

Through Notice and Elevated the

Exercise of Rescission Rights for

Homeowners Facing Foreclosure

In 1995 Congress responded to judicial rulings

that it believed imposed outsize liability on the

financial services industry by amending TILA to

afford creditors certain defenses from liability. In so

doing, Congress reinforced that rescission is

exercised through notice in two ways. First,

Congress added § 1635(h), which provides an explicit

defense to rescission to creditors who use the Board’s

model forms to provide notice of rescission rights.

See Appendix A, 13a. In providing this defense,

Congress reinforced that these forms, which

explicitly direct the exercise of rescission by notice,

convey all of the information mandated by § 1635(a),

regarding the exercise of rescission. As long as the

creditor properly completes and delivers model forms,

which direct the consumer to do nothing more to

exercise rescission than to sign and return the form

to the creditor, it is immunized. By providing

immunity when these forms are used, Congress

approved the instructions in the Board’s model form

directing the consumer to exercise rescission simply

by signing and returning the form to the creditor and

imposing no further obligation to exercise the right.

25

Second, Congress immunized creditors from

rescinding certain previously consummated loans

with specified characteristics, but also created four

exceptions to this immunity. Truth in Lending Act

Amendments of 1995, Pub. L. No. 104-29, § 4(a), 109

Stat. 273 (1995) (current version at 15 U.S.C.

§1649(a) (2012)) (“1995 Amendments”); Appendix A,

11a – 13a. Through these exceptions Congress

restored liability for individual lawsuits filed and for

class actions certified before certain dates. See id.,

12a. Significantly for this appeal, creditors also

restored liability in the case of "any consumer credit

transaction with respect to which a timely notice of

rescission was sent to the creditor before June 1,

1995." 1995 Amendments, 15 USC § 1649(b)(1-4)

(emphasis added); Appendix A, 12a – 13a. By

separately protecting borrowers who had timely

exercised rescission through notice, Congress again

expressed the straightforward, plain reading of the

statute and regulation that rescission is exercised

through notice. Any other interpretation makes this

exception a nullity.

The 1995 Amendments are also clear that

when a homeowner is facing foreclosure, TILA

provides greater rights to rescind. The 1995

Amendments generally denied access to rescission

based on numerical disclosures unless disclosure of

the finance charge was understated by at least “one-

half of one percent of the total amount of credit

extended.” 1995 Amendments, 15 U.S.C.

26

§ 1605(f)(2).8 However, understanding that saving

homes is the primary goal of the rescission remedy,

Congress revoked that rule for homeowners in

foreclosure, allowing them to rescind the mortgage if

the finance charge was understated by as little as

$36.9 Id., 15 U.S.C. § 1635(i)(2); Appendix A, 13a –

15a. Congress further enhanced rescission in

foreclosure by providing that the immunity it created

in § 1649 does not apply when a homeowner is facing

foreclosure. Id., 15 U.S.C. § 1635(i)(1); Appendix A,

14a.

Moreover, allowing homeowners to exercise

their rescission rights in foreclosure does not cloud

title or render loans unenforceable. That uncertainty

was addressed by this Court’s decision in Beach, in

the 1995 Amendments, and in appellate decisions

interpreting rescission as a “purely individual

remedy.” Andrews v. Chevy Chase Bank, 535 F. 3d

570, 575 (7th Cir. 2008), cert. den. 557 U.S. 936

(2009); McKenna v. First Horizon Home Loan Corp.,

475 F. 3d 418 (1st Cir. 2007). But individual actions

based on timely rescissions, and lawsuits filed one

8 The Jesinoskis’ rescission claims are unaffected by the 1995

Amendments.

9 If homeowners with a $611,000 mortgage (like the Jesinoskis)

are not in foreclosure, the finance charge is deemed accurate

unless it is understated by at least $3,055, or one-half of one-

percent of the note.

27

year later, have no significant or long term impact on

the functioning of the banking industry or the

enforceability of mortgage contracts.

Further, if the filing of a lawsuit is mandatory,

as Respondents contend, some creditors may be

tempted to induce rescinding homeowners not to file

a lawsuit on the false promise that the creditor will

honor the rescission. If Respondents’ rule prevails,

and the creditor fails to deliver on its promise, the

homeowner’s right will nevertheless have been

extinguished without consequence to the creditor,

and the statute’s fundamental purpose “to protect

homeowners from [] unscrupulous business tactics”

will be thwarted. Gardner & North Roofing & Siding

Corp. v. Board of Governors, 464 F.2d 838, 841 (D.C.

Cir. 1972).

II. BROAD ACCESS TO TILA’S

RESCISSION REMEDY PROTECTS

INDIVIDUALS AND COMMUNITIES

FROM THE HARMFUL EFFECTS

OF FORECLOSURE.

TILA violations were widespread during the

run-up to the foreclosure crisis. See Lea Krivinskas

Shepard, It’s All About the Principal: Preserving

Consumers’ Right of Rescission Under the Truth in

Lending Act, 89 N.C. L. Rev. 171, 175 (2010).

Allowing homeowners to exercise their TILA

rescission rights through written notice minimizes

foreclosures, thereby significantly mitigating harms

to individuals and communities reeling from the

impact of the crisis.

28

Congress clearly intended TILA to help

homeowners avoid foreclosure. See Section I.F.,

supra, at 24. Given that the number of mortgage

defaults skyrocketed in the wake of the mortgage

crisis, the importance of foreclosure avoidance to

individuals and to hard-hit communities cannot be

overstated. In numerous towns and cities,

foreclosures have not only harmed those families

losing homes but also inflicted significant costs on

neighboring homeowners, whose property values

have fallen, and local governments, which face

increased costs and decreased tax bases.

Across the nation, enormous numbers of

homeowners have lost their homes during this crisis.

As of May 2014, more than five million homes have

been lost since the real estate bubble burst in

September 2008. CoreLogic, Inc., CoreLogic Reports

47,000 Completed Foreclosures in May (July 8,

2014).10 And the crisis continues. In Florida, more

than 122,000 homes were foreclosed upon in the last

year alone; in Michigan, that number was 44,000. Id.

These foreclosures have had a substantial impact on

the homeownership rate, which stands at 64.8%,

down from a high of 69.2% in 2004. U.S. Census

Bureau News, Residential Vacancies and

Homeownership in the First Quarter 2014, CB14-61

U.S. Department of Commerce 5 (2014).11 Many

10 http://www.corelogic.com/about-us/news/corelogic-reports-

47,000-completed-foreclosures-in-may.aspx.

11 http://www.census.gov/housing/hvs/files/currenthvspress.

pdf.

29

more homeowners remain under water on their

mortgages and thus at elevated risk of foreclosure.

See generally Peter Dreier, Saqib Bhatti, Rob Call,

Alex Schwartz & Gregory Squires, Underwater

America: How the So-Called Housing “Recovery” Is

Bypassing Many American Communities, Haas

Institute 5 (2014).12

The financial harms stemming from all these

foreclosures do not stop at the edge of the foreclosed

property. Instead, even a single foreclosure has a

spillover effect on neighboring properties, see, e.g.,

Kai-yan Lee, Foreclosure’s Price-Depressing Spillover

Effects on Local Properties: A Literature Review,

Federal Reserve Bank of Boston 1 (2008),13 reducing

home values, even for homeowners who are current

on their mortgages or have no mortgage at all. An

estimated 95 million households lost home equity

between 2007 and 2012 as a result of neighbors’

foreclosures. Center for Responsible Lending, 2013

Update: The Spillover Effects of Foreclosures 1 (2013)

(“Spillover Effects 2013”).14 A conservative estimate

finds that during that time period, residents living in

close proximity to properties in foreclosure (one city

12 http://diversity.berkeley.edu/sites/default/files/HaasInsitute_

UnderwaterAmerica_PUBLISH_0.pdf.

13 https://www.bostonfed.org/commdev/pcadp/2008/pcadp 0801.

pdf.

14 http://www.responsiblelending.org/mortgage-lending/

research-analysis/2013-crl-research-update-foreclosure-

spillover-effects-final-aug-19-docx.pdf.

30

block) lost about $2.2 trillion in property value

attributable to those foreclosures. Id. Others have

estimated the proportional loss in value within the

same radius to be especially high in low to moderate-

income communities. Dan Immergluck & Geoff

Smith, The External Costs of Foreclosure: The Impact

of Single-family Mortgage Foreclosures on Property

Values, 17 Housing Policy Debate 57, 58, 71-72

(2006). These effects are compounded where multiple

foreclosures are concentrated in one neighborhood.

John P. Harding, Eric Rosenblatt & Vincent W. Yao,

The Contagion Effect of Foreclosed Properties, 66 J.

Urb. Econ. 164, 165 (2009). The impacts on

homeowners of color have been especially severe—

more than one-half of total spillover losses have

occurred in communities of color. Spillover Effects

2013 at 1.15

15 High-risk, predatory lending was especially common in

communities of color. See, e.g., Peter Dreier, Saqib Bhatti, Rob

Call, Alex Schwartz & Gregory Squires, supra, at 5; Debbie

Gruenstein Bocian, Wei Li & Keith S. Ernst, Foreclosures by

Race and Ethnicity: The Demographics of a Crisis, Center for

Responsible Lending 6 (2010), available at http://www.

responsiblelending.org/mortgage-lending/research-analysis/

foreclosures-by-race-and-ethnicity.pdf. As a result, the

foreclosure crisis has greatly exacerbated racial disparities in

wealth. Between 2007 and 2010, the wealth of white families

fell by 11 percent. See Signe-Mary McKernan, Caroline

Ratcliffe, Eugene Steuerle & Sisi Zhang, Less Than Equal:

Racial Disparities in Wealth Accumulation, The Urban Institute

3 (2013). By comparison, Hispanic families saw their wealth cut

by over 40 percent, and black families saw their wealth fall by

31 percent. Id.at 2-3.

31

Foreclosures also significantly erode tax bases

while simultaneously increasing local expenditures.

In North Carolina, the total decline in home values

and the local tax base resulting from foreclosures was

estimated to be $851 million in 2005 and 2006,

several years before the peak of the foreclosure crisis.

Center for Responsible Lending, Subprime Spillover:

Foreclosures Cost North Carolina Neighbors $861

Million 1 (2008).16 A report from the U.S. Senate’s

Joint Economic Committee noted that a city could

lose up to $20,000 per house abandoned in

foreclosure in lost property taxes, unpaid utility bills,

property upkeep, sewage, and maintenance. Joint

Econ. Comm. of the U.S. Senate, Sheltering

Neighborhoods from the Subprime Foreclosure Storm

15 (2007) (citing William C. Apgar and Mark Duda,

Collateral Damage: The Municipal Impact of Today’s

Mortgage Foreclosure Boom, National Multi-Housing

Council (2005).17 Vacant, foreclosed properties

extract additional costs, in terms of both public safety

and municipal finances. Properties that have

completed the foreclosure process and are held by

banks, known as “Real-Estate Owned” (“REO”)

properties, often remain unoccupied for extended

periods, depressing neighboring property values and

increasing the risk of neighborhood crime and blight.

16 http://www.responsiblelending.org/north-carolina/nc-

mortgage/tools-resources/facts-tips/nc-subprime-spillover-

august-08-update.pdf.

17 http://www.jec.senate.gov/archive/Documents/Reports/

subprime11apr2007revised.pdf.

32

See Ingrid Gould Ellen, Josiah Madar & Mary

Weselcouch, The Foreclosure Crisis and Community

Development: Exploring REO Dynamics in Hard-Hit

Neighborhoods, Furman Center for Real Estate &

Urban Policy 2 (2013).18 The vulnerability of vacant

REO properties to vandalism and theft further

decreases the value of neighboring properties. See

generally Stephen Whitaker & Thomas J.

Fitzpatrick, The Impact of Vacant, Tax-Delinquent,

and Foreclosed Property on Sales Price of

Neighboring Homes, 11-23R Federal Reserve Bank of

Cleveland 1, 4-5 (March 2012).19

Vacant properties also reduce “eyes on the

street” and provide venues for illicit activity. Ingrid

Gould Ellen, Josiah Madar & Mary Weselcouch,

supra, at 4. The violent crime rate in Charlotte,

North Carolina tripled in high-foreclosure

neighborhoods. G. Thomas Kingsley, Robin Smith &

David Price, The Impacts of Foreclosures on Families

and Communities, The Urban Institute 17-18 (2009)

(citing Michael Bess, Assessing the Impact of Home

Foreclosures in Charlotte Neighborhoods, 1

Geography & Public Safety 1, 2-4 (2008)).20 In New

18 http://furmancenter.org/files/publications/REOHardHit

WorkingPaperApril2013.pdf.

19 http://www.clevelandfed.org/research/workpaper/2011/

wp1123r.pdf.

20 http://www.urban.org/UploadedPDF/411909_impact_of_

forclosures.pdf.

33

York City, a single foreclosure led to a 1.3 percent

increase in total crime, a 2.6 percent increase in

violent crime, and a 2.6 percent increase in public

order crime on that block. Furman Center for Real

Estate & Public Policy, Do Foreclosures Cause Crime?

3 (Feb. 2013).21 Foreclosures in these neighborhoods

require municipalities to spend more on policing22

and firefighting. A fire on a foreclosed property can

cost a municipality $34,000. G. Thomas Kingsley,

Robin Smith & David Price, supra. at 20.23 (citing

William C. Apgar and Mark Duda, supra, at 31).

Foreclosures also increase demand for social services

at times when hard-hit communities can ill afford to

fund the increased need. See G. Thomas Kingsley,

Robin Smith & David Price, supra, at 6. Taxpayers

ultimately pay the bill for the substantially increased

costs of these public services caused by the

foreclosure crisis.

As with other collateral impacts of foreclosure,

increases in neighborhood blight and crime due to

REO properties, and their related municipal costs,

have disproportionately harmed communities of

21 http://furmancenter.org/files/publications/DoForeclosures

CauseCrime.pdf.

22 See William C. Apgar & Mark Duda, The Municipal Cost of

Foreclosures: A Chicago Case Study, Homeownership

Preservation Foundation 24 (Feb. 2005), available at http://

www.nw.org/network/neighborworksProgs/foreclosuresolutions

OLD/documents/2005Apgar-DudaStudy-FullVersion.pdf.

23 http://www.urban.org/UploadedPDF/411909_impact_of_

forclosures.pdf.

34

color. A study by the National Fair Housing Alliance

found substantial disparities between the

maintenance of REO properties in communities of

color and those in predominantly white communities.

See generally National Fair Housing Alliance, The

Banks Are Back – Our Neighborhoods Are Not:

Discrimination in the Maintenance and Marketing of

REO Properties 2 (Nov. 2011);24 see also Debbie

Gruenstein Bocian, Wei Li & Keith S. Ernst,

Foreclosures by Race and Ethnicity at 3-4, available

at http://www.responsiblelending.org/mortgage-

lending/research-analysis/foreclosures-by-race-and-

ethnicity.pdf.

The broad availability of TILA rescission

rights can limit the number of foreclosures,

significantly mitigating collateral harms to

communities, and thereby benefitting the broader

economic recovery, see Robert C. Hockett, It Takes a

Village: Municipal Condemnation Proceedings and

Public/Private Partnerships for Mortgage Loan

Modification, Value Preservation, and Local

Economic Recovery, 18 Stan. J.L. Bus. & Fin. 121,

135-36 n.65 (2012). The robust protection of TILA

rights is thus vitally important to the well-being of

homeowners, neighborhoods, and municipalities.

24 http://www.nationalfairhousing.org/Portals/33/ the_banks_

are_back_web.pdf.

35

CONCLUSION

Congress created the right of rescission to

protect homeownership and made it easy for a

homeowner to rescind through simple notice. The

plain language of the statute and the

contemporaneous interpretation of the Federal Reserve

Board confirm that a lawsuit is not required to

exercise the right. The Court should uphold this rule.

36

Respectfully submitted,

NINA F. SIMON

1629 K STREET, NW

STE. 300

WASHINGTON, DC 20006

202 827-9770

CAROLYN L. CARTER

STUART ROSSMAN

NATIONAL CONSUMER

LAW CENTER

7 WINTHROP SQUARE

BOSTON, MA 02110

617 542-8010

JEAN CONSTANTINE-DAVIS*

*Counsel of Record

AARP FOUNDATION

LITIGATION

601 E STREET, NW

WASHINGTON, DC 20049

jcdavis@aarp.org

202 434-2060

DENNIS D. PARKER

LAURENCE M. SCHWARTZTOL

RACHEL E. GOODMAN

AMERICAN CIVIL LIBERTIES UNION

125 BROAD ST.,

NEW YORK, NY 10004

212 549-2500

ATTORNEYS FOR AMICI CURIAE